Before attending the National Academy of Social Insurance's 25th annual policy conference, Medicare and Social Security in a Time of Budget Austerity, I had very little knowledge of the details of the Social Security system. Throughout the conference, I couldn't help but think that the U.S. education system failed me by not preparing me for how to save for retirement.
First, in the presentation from Vanessa Cardenas, it was clear that people of color will become the majority in the next few decades. Some people say race doesn't matter. But, it does. Latino and African-American students score lower on standardized tests, have fewer college degrees, and earn less than their white and Asian-American counterparts. This historical trend keeps repeating itself because the funding of our public education system is tied to property taxes. In essence, those who come from wealthier families, usually white, tend to receive a better education than minority students, and as a result, have lower paying jobs. Unless we reform how education is funded, this problem will keep perpetuating itself.
In another presentation, Ngina Chiteji pointed out that Americans need more than just Social Security for a secure retirement. However, saving for retirement is more difficult for non-white or Hispanic Americans.
According to the Federal Reserve Board's 2010 Survey of Consumer Finance, only 50.4% of U.S. households have a retirement account, such as an IRA or 401K. However, just 34.4% of non-white or Hispanic households have a retirement account. Let that sink in. In a country where non-whites will soon be the majority, two-thirds of that population is not saving enough for retirement. For minorities who do have a retirement account, the situation is not much better compared to the overall U.S. population. Their median retirement account balance is $25,000 compared to the $44,00 for all U.S. households. To me, these figures are not a death sentence, but rather an opportunity for our country to fix the situation before it's too late.
Here are two steps we can take to help better prepare Americans for retirement:
Incorporate financial literacy into the public school education system; and
Reform public education funding.
Speaking from the perspective of a student, I believe the U.S. education system needs to incorporate basic personal financial planning courses into its curriculum. I didn't take a budgeting course until I attended the University of Florida as an undergraduate student because such courses weren’t offered in my K-12 education. Recently, a college-educated friend with a great job at one of D.C.'s most influential policy think tanks asked me how to create a personal budget. There is no reason why a high school or college graduate shouldn’t be able to create a personal budget. The problem is rooted in our public education system. For various reasons, we have failed to equip our students with the most basic skills. While core education is important, let’s not forget to teach our students the most basic skills needed to navigate life.
Nearly 30% of Americans are unable to retire because they have not saved enough for retirement, resulting in many of them now planning to work until they are 80 years of age or older. If the Americans are unable to retire due to lack of sufficient retirement savings, it hurts our economy and future generations. Older Americans need to retire to allow younger generations to enter the workforce, and allow them to create the next generation of innovations to move society forward. The current debate regarding Social Security seems like a daunting task for legislators. However, I believe it is an opportunity for us to address the problem and provide Americans with the skills they need to successfully save for retirement. Legislators can start to fix the problem by providing our students with financial literacy skills. Americans need to start saving early, and need education on how to do it successfully.
James Chan is a first year Master of Public Policy candidate at the Hubert H. Humphrey School of Public Affairs. As a Floridian, he is constantly reminded of the importance of social insurance programs such as Social Security and Medicare, especially during elections. James was one of six students and young professionals awarded a scholarship to attend NASI’s 25th annual policy research conference January 31- February 1, 2013, in Washington, DC.